Accounting-Resource: Ch. 22 of Intermediate Accounting

| January 30, 2017

Question
Question # 1
Resource: Ch. 22 of Intermediate Accounting
Locate an article from a financial periodical from the past 2 years about a company that
restated its financial statements due to an error in accounting principal. Examples of
periodicals are CFO and Journal of Accountancy.
Write a paper of no more than 700 words with references discussing the restatement of the
company, the accounting principals involved, the effect of errors and changes on financial
statements, and the affect on the stockholders.
Format your paper consistent with APA guidelines.

Question # 2 please:

Ron Nord and Lisa Smith are examining the following statement of
cash flows for Carpino Company for the year ended January 31, 2007.
CARPINO COMPANY
Statement of Cash Flows
For the Year Ended January 31, 2007
Sources of cash
From sales of merchandise
From sale of capital stock
From sale of investment (purchased below)
From depreciation
From issuance of note for truck
From interest on investments
Total sources of cash
Uses of cash
For purchase of fixtures and equipment
For merchandise purchased for resale
For operating expenses (including depreciation)
For purchase of investment
For purchase of truck by issuance of note
For purchase of treasury stock
For interest on note payable
Total uses of cash
Net increase in cash

$380,000
420,000
80,000
55,000
20,000
6,000
961,000

330,000
258,000
160,000
75,000
20,000
10,000
3,000
856,000
$ 105,000

Ron claims that Carpino’s statement of cash flows is an excellent
portrayal of a superb first year with cash increasing $105,000. Lisa
replies that it was not a superb first year. Rather, she says, the year was

an operating failure, that the statement is presented incorrectly, and that
$105,000 is not the actual increase in cash. The cash balance at the
beginning of the year was $140,000.
Instructions
With the class divided into groups, answer the following.
a. Using the data provided, prepare a statement of cash flows in
proper form using the indirect method. The only noncash items in
the income statement are depreciation and the gain from the sale
of the investment.
b. With whom do you agree, Ron or Lisa? Explain your position.
Resource: Ch. 12 of Financial Accounting
Read the scenario presented in Broaden Your Perspective (BYP) 12-6 on p. 641 in Ch. 12
of Financial Accounting.
Prepare the statement of cash flows using the indirect method. The only noncash items are
depreciation and the gain on sale from investments.
Write a memo to shareholders explaining whether the organization had a performing or
underperforming first year.
Discuss the reasons for your conclusion, referencing actual numbers from the statement of
cash flows you developed.

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